The move builds upon Point72 Asset Management’s forays into crypto derivatives.
The endeavor would require substantial resources in terms of employees and operational expenditures.
Hedge fund billionaire Steve Cohen is laying the groundwork for an investment firm focused exclusively on cryptocurrency, according to four sources familiar with the matter.
Though the new entity is in its early innings, sources said the business plans to trade spot cryptocurrencies — a segment Cohen’s multi-strategy hedge fund firm, Point72 Asset Management, has yet to touch. It would also trade digital asset derivatives, as well as look to write checks to outside digital asset-focused hedge fund managers, including possible seed deals.
The name of the startup — which is set up separately from Point72, Point72 Ventures and Cohen’s family office — isn’t known. But Cohen himself has played a key role in its formation, which would require substantial expenditures when it comes to staffing, not including pricey trading infrastructure and operational needs.
It’s the latest indication that Cohen, who has snapped up stakes in crypto startups he deems promising, is becoming more bullish still on digital assets. A growing number of deep-pocketed traditional financiers are weighing deploying big-time capital in the space, cognizant of bottom-basement prices as markets continue to roil following the collapse of Terra stablecoin UST and the demise of crypto lenders including Celsius and Voyager.
A spokesperson for Cohen and his asset management firms declined to comment. Sources were granted anonymity to discuss sensitive business dealings.
In addition to trading more vanilla spot cryptoassets, the new firm would likely dabble in decentralized finance projects, including yield farming, one source said. The up-and-coming business line would also look to engage in staking, an area drawn into the spotlight leading up to Ethereum’s pending transition from proof-of-work to proof-of-stake.
Though it’s thought that the startup has no immediate plans to accept outside capital, the endeavor is a mechanism for Cohen to start laying the foundation for a future broad-based crypto trading platform. Even during the bear market, competition for top-tier talent has intensified as Point72 multi-strategy hedge fund rivals, such as Millennium Management, have increasingly devoted resources to the sector.
Even Citadel’s Ken Griffin, long a skeptic who last fall dubbed cryptocurrency a “jihadist call” against the US dollar, has reversed course, acknowleding digital assets are here to stay.
That said, the space is ripe with regulatory concerns, as well as conservative sovereign wealth fund limited partners that have urged caution about crypto. Both points are rationale for multi-billion hedge fund firms, for the most part, to refrain from trading spot crypto products via their flagship vehicles, sources said.
“They’re still working through the details, but the plan was to not put all the bread in the flagship fund,” one source said. “They clearly have a lot of learning to do about the space. [Probably] are not ready to make that call just yet.”
The regulatory uncertainty between the SEC and the Commodity Futures Trading Commission (CFTC), in terms of whether the likes of bitcoin and ether are securities or commodities, has heightened tensions.
“The regulatory stuff is something they’re concerned about, as well,” one source said. “They’re worried about how they actually touch this asset class.”
Backing outside traders would be another way to pick up intelligence on viable — and, crucially for the asset manager, scalable — strategies, without the complications that would come with directly investing in digital assets internally.
It’s altogether a natural extension of Cohen’s angel investments into blockchain companies. Not all have panned out, including ditching his stake in proprietary digital asset trader Radkl, but Cohen still enjoys preferred access to dealflow, by traditional finance standards.
“[It’s probably] what all these other guys are doing,” one source said. “The firms are not in crypto, so they tell investors, but the founders are.”
Point72 has $26.1 billion in assets under management. The firm is looking to hire a host of candidates for its own developing internal crypto operations.